Lixil Said to Be in Talks to Buy Grohe for 3 Billion Euro

By Aaron Kirchfeld -
Sep 23, 2013

Lixil Corp., a Japanese toilet
maker, is in advanced talks to buy German bathroom-fixtures
company Grohe Group for more than 3 billion euros ($4 billion),
according to people with knowledge of the matter.

The companies may announce an agreement as early as this
week, said the people, asking not to be identified because the
negotiations are private. An initial public offering remains an
option because no final deal has been reached, they said.

Shares of Lixil, which bought bathroom-fixture maker
American Standard Brands this year, fell the most in almost two
years in Tokyo trading. TPG Capital and Credit Suisse Group AG (CSGN),
which bought Grohe in 2004 for a reported $1.84 billion from BC
Partners Ltd., helped expand the company’s reach into Asia in
2011 when they bought control of China’s Joyou AG. (JY8)

“The addition of Grohe would be complementary from a
global expansion and product line development point of view,”
said Mark Brown, an analyst at JI Asia Research Ltd. “What we
don’t know is how big the cost will be, and how they will fund
it?”

Lixil is a subsidiary of Lixil Group Corp. (5938) that also sells
construction materials. The company said last month it’s
considering overseas alliances and acquisitions to more than
double sales to 1 trillion yen ($10 billion).

Shares Decline

Shares of Lixil Group fell as much as 5.8 percent, the most
since November 2011, to 2,054 yen. The stock traded at 2,067 yen
as of 11:09 a.m. in Tokyo.

Grohe spokeswoman Ulrike Heuser-Greipl said the exit
process including a potential sale or IPO is still ongoing and
declined further comment. Miyuki Otomo, a spokeswoman for Lixil,
based in Tokyo, declined to comment on Grohe when contacted by
Bloomberg News today. Representatives for TPG, Geberit and
Credit Suisse declined to comment.

Japanese companies are targeting overseas expansion as the
nation’s population shrinks. SoftBank Corp. acquired control of
Sprint Nextel Corp., the third-largest U.S. wireless carrier, in
July. Suntory Beverage & Food Ltd. reached a deal to buy the
Lucozade and Ribena drink brands from GlaxoSmithKline Plc for
1.35 billion pounds ($2.2 billion) this month.

Lixil Group had 285 billion yen of long-term borrowings
outstanding at the end of March, according to data compiled by
Bloomberg. The company is rated a fifth-highest A+ by Japan’s
Rating & Investment Inc. and had 40 billion yen in bonds
outstanding, according to data compiled by Bloomberg.

Private-equity firms are now tapping low borrowing costs
and rising equity markets to exit investments made before the
financial crisis in 2007.

TPG, the private equity firm run by David Bonderman and
James Coulter, and Credit Suisse have been exploring a dual-track sale and listing process since April, people familiar with
the preparations said at the time. Grohe, which is based in
Dusseldorf and calls itself Europe’s largest provider of
sanitary fittings, had also drawn interest from companies
including Swiss competitor Geberit AG (GEBN), the people said.